The service will be available to anyone in the U.S. with a
broadband-Internet connection, Bob Mudge, president of Verizon’s
consumer business, said in a phone interview. Verizon, looking
to expand its video service offering nationally, will take a 65
percent stake in the partnership with Coinstar holding 35
percent, the companies said. Coinstar owns the Redbox video-
rental business with more than 34,000 kiosks nationwide.

The joint venture, scheduled to start in the second half,
may create new competition for Netflix’s streaming service as
consumers seek new ways to watch movies and television shows
online. Verizon said it will secure new streaming rights with
content providers, though the company declined to specify if the
new offering will focus on feature films or TV shows.

“The service will have a Netflix look and feel, which
means it will likely offer more generic library content, and not
the latest shows and movies, in terms of digital rights,” said
Christopher Watts, an analyst at Atlantic Equities LLP in
London. “That’s the model Verizon is aiming for.”

Coinstar, based in Bellevue, Washington, added 1.8 percent
to $50.56 at the close in New York, while Verizon climbed 0.8
percent at $38.14. Netflix rose 2.2 percent to $129.25.

Target Market

Mudge said Coinstar and Verizon are “still working through
the streaming rights deals with different companies.”
Coinstar’s Redbox, which doesn’t offer a streaming service,
rents DVDs for about $1 at its kiosks.

“We have 36 million e-mail addresses,” Coinstar Chief
Executive Officer Paul Davis said in the interview. “That’s a
lot of people we can talk to about this new service.”

Coinstar says 30 million people use its kiosks and that 68
percent of the U.S. population is within a five-minute drive of
its locations. New York-based Verizon has 4.2 million customers
for its FiOS video service. Los Gatos, California-based Netflix
has 24.4 million subscribers.

The popularity of online video streamed to televisions,
computers and portable devices has attracted companies including
Apple Inc., Google Inc. and Amazon.com Inc. to the market. Dish
Network Corp. also offers an online film service that delivers
movies under the Blockbuster name to its satellite-TV customers.

The Coinstar joint venture could also help Verizon compete
with cable companies, which offer on-demand content over their
networks. Meanwhile Verizon Wireless, a subsidiary Verizon co-
owns with Vodafone Group Plc, is working with cable providers
Comcast Corp. (CMCSA) and Time Warner Cable Inc. (TWC) to cross-sell wireless
and cable-TV plans to their customers.

While Coinstar and Verizon didn’t offer many details about
the service, delivery to mobile devices will probably be a key
part of the plan, said Sam Greenholtz, an analyst at Telecom
Pragmatics Inc. in Westminster, Maryland.

“You’ll see Verizon make wireless a major push,” he said.
“It’s one area where they have an advantage over Netflix.”